In this article, we are going to break down the idea of "total compensation" (which includes fixed and variable income, as well as other kinds of compensation) and give you practical advice you can use in your next negotiation.
Let's start by making one thing clear: after reading this article, you will no longer describe what you earn as the fixed salary you receive each month. 🙏 In fact, next time you talk to recruiters and HR, the term "salary" should have exited your vocabulary. From now on, you should only be speaking in terms of "total compensation" or "salary package" when referring to the different components of your remuneration.
In short, a total compensation package is composed of the following:
Whether you are already employed, or on the job market, it is essential that you understand all the different elements at play in your earnings because this will enable you to make a strong case when you (re)negotiate your salary.
But that's not all. A clear understanding of how your overall remuneration works will also give you the tools necessary to create working conditions that suit your profile, your position, your performance, and the professional environment to which you aspire.
Finally, by mentioning your "total compensation package", you will demonstrate your commitment to building a solid and sustainable relationship with the company.
What you don't want is to latch on to a short-term, bland opportunity. What you do want is to progress within the organization, and to help move it forward by creating attractive and fair employment conditions. Your end game should be a win-win situation which ultimately contributes to the overall growth of the company.
This is the basic part. On top of your stable, contractual salary paid monthly by your employer, your fixed salary also includes your paid leave.
Even though it might seem tempting to throw all your energy into getting your fixed salary raised, this might not be the best strategy for three main reasons:
These are the most familiar components of variable remuneration. They can be individual or collective, and their amount varies depending on qualitative and quantitative aspects of performance.
Here are a few examples of individual targets subject to a variable bonus:
The negotiation of variable, target-based bonuses will allow you to add value to the quality of your work. However, make sure you set achievable targets. You should always simulate the attainability of your targets before approving them with your manager.
In some companies, bonuses are contingent on team, and sometimes even company, objectives being met. Do not hesitate to bring this issue up internally.
Bonuses are usually calculated and paid several times a year. By negotiating their amount, their associated objectives, and the rate of their payment, you and your employer will collaborate to build a personalized compensation package you find both attractive and motivating.
Sofiane Chakki, a compensation and benefits manager at scale-up Aircall, insists: "variables are the uncertain part of a compensation package. Their overall weight must be carefully measured to assess what you are willing to risk. Under which conditions is the bonus paid? Which objectives are set? How are they evaluated? These crucial elements must be negotiated in detail with your manager."
Profit sharing is optional and is paid to all employees on a flat-rate basis.
It is paid annually and adds up to a relatively large amount of money that can be used to finance a substantial project (whereas variable remuneration, which is only received several times a year, is often on a smaller scale and constitutes a fixed salary supplement that is typically used to cover day to day living costs).
Profit sharing is quite rare in start-ups which, by definition, require several years to generate significant profits.
Stock options are the best known and most widespread components of equity. They are generally offered in start-ups and tech companies as a form of alternative (or deferred) form of compensation expressed in shares.
This scheme allows you to buy shares in the company at a pre-determined date and price, subject to certain conditions.
Although the rewards are not immediate (you have to wait several years before you can access the money), stock options could potentially pay off big time, especially if you join a company that is just launching that later seriously takes off.
"In some positions, share allocation may represent 200, 300, 400, and up to 500% of the base salary in expected earnings. Its value is therefore definitely not to be underestimated… especially if the company ends up going public. For an applicant or an employee, equity is a store of value that must be negotiated, particularly when there is no room for growth in fixed and variable salaries."
- Sofiane Chakki, Aircall
The more familiar of these include company phones and cars.
But there are other fringe benefits that can be added to the list and save you a lot of money such as:
These advantages include company health insurance and pension schemes. Despite seeming less advantageous at first glance, these should nonetheless be seen as bonuses in their own right.
"More and more companies are providing full health insurance coverage. This is the case at Aircall. This coverage can amount to up to 2,000 euros per year for an employee," explains Sofiane Chakki.
Having a good health insurance plan sponsored by your employer, as well as company contributions to a 401(k)-pension plan could yield substantial savings, which in some cases end up being more attractive than a 2 or 3% salary increase. The key here is to think in terms of overall purchasing power, not in terms of your fixed monthly income
"By translating these amounts into percentages of the annual salary, it is possible to assess the actual financial impact of company funded health insurance. In a more pragmatic sense, checking the remaining cost of a pair of glasses or of dental treatment is a simple way of monetizing this advantage."
- Sylvie Girbal, compensation expert at global company Willis Towers Watson.
Would you like to live in the city of your choice, or have more time for personal projects? Don't forget to consider some of the non-material aspects of your compensation package. The aim here is to create a fulfilling, flexible and personalized work environment.
It is entirely possible to negotiate days off, in particular:
Two years into a global pandemic, remote working has become standard practice. However, its modalities vary from one company to another.
It is important to clarify your expectations regarding remote work early in the recruitment process and to find out about the company's internal policies. You should ask the following questions:
Last but not least, training is another important benefit you should take into account when evaluating your compensation package.
Your company should be willing to fund one or more training modules. Once again, this kind of benefit is not monetary, but it could be a great boost for your career. Your employer obviously has a say in the content of the training course that you end up following.
If you are a developer, the chances of your boss greenlighting an opera singing course are slim. But it would make sense to ask for a training course that helps you master a technology you are not quite familiar with. By doing so, you will be investing in your future employability. Another possibility is to join a mentoring or a coaching program.
More and more UK employers are embracing flexible pay.
A kind of tailor-made remuneration which allows you to build your own salary package according to your needs and preferences.
You exchange part of your pay for the benefits of your choice within certain limits set by the company.
Here's an example:
You might choose to exchange all or part of your supplementary leave days for a company car, better insurance, or a budget to fund an electric bike. However, this is not a free for all. The interchangeable elements vary by sector of activity, legislation, and the company's own regulations.
In addition to customizing your salary package, flex income plans allow you to boost your purchasing power by trading heavily taxed fringe benefits for ones that are tax friendly.
The list of ingredients which might end up in your salary package is long and diverse. Some of the basic and collective benefits are non-negotiable. Others can be completely customized. To make sure you choose the right package or company, make sure you think seriously about which kind of compensation matters most to YOU. Do this before you talk to your manager, accept an offer, or make a counteroffer.
Now that you know all about total compensation, it's up to you!
If you enjoyed this article, stay tuned for our pieces on equity and how to successfully negotiate your salary! Watch out for these in your inbox soon!
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"How much do you earn?" Like most people, you are probably tempted to answer this question with your fixed salary, perhaps with the odd variable bonus on top. But your salary is not just the amount you make each month.
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